Professor Uche Uwaleke, President of the Capital Market Academics of Nigeria and Director of the Institute of Capital Market Studies, has urged authorities to amend the Central Bank of Nigeria Act of 2007. This amendment aims to establish a transparent framework for strengthening coordination between fiscal and monetary policies. Uwaleke's call follows a recent Memorandum of Understanding between the Federal Ministry of Finance and the Central Bank of Nigeria to formalize their collaboration on policy coordination.
Uwaleke emphasized that the current Memorandum of Understanding can serve as a foundation, but a more durable institutional framework is needed. He suggested that the relevant provisions of the CBN Act 2007 and other fiscal-governance legislation should be reviewed and amended where necessary. This would clarify the responsibilities of fiscal and monetary authorities, establish procedures for setting inflation objectives, and protect the CBN's operational autonomy.
According to Uwaleke, the proposed legislation should not allow fiscal authorities to dictate monetary policy decisions. Instead, it should distinguish between shared macroeconomic objectives and independent policy instruments. The fiscal authority should remain responsible for fiscal policy, taxation, public expenditure, and debt management, while the CBN retains the authority to conduct monetary policy.
Uwaleke also stressed the importance of information exchange and public explanation of policy interactions between the fiscal and monetary authorities. The broader objective is to create a coherent economic policy architecture where monetary, fiscal, trade, financial, and structural policies reinforce one another. Nigeria's current economic circumstances make this institutional reform especially urgent, he noted.
Uwaleke applauded the Memorandum of Understanding, describing it as a framework for cooperation that transcends personal relationships between the Minister of Finance and the CBN Governor. The agreement establishes structured mechanisms for information-sharing, aligned macroeconomic assumptions, and conflict resolution. This framework can help prevent fiscal and monetary actions from working at cross-purposes.
The logic behind the initiative is straightforward, Uwaleke argued. Fiscal and monetary policies are administered by different institutions but operate within the same economy, affecting many of the same variables. This overlap necessitates coordination to achieve coherent economic outcomes. The Memorandum of Understanding is significant because it creates a structured mechanism for collaboration between government officials.
Uwaleke's proposal has implications for Nigeria's economic policy architecture. If implemented, it could lead to more effective coordination between fiscal and monetary authorities, ultimately contributing to more stable and predictable economic outcomes. The proposed changes to the CBN Act 2007 would require careful consideration and consultation among stakeholders, including government officials, economists, and financial experts.
Key points
- Professor Uche Uwaleke calls for amendment to CBN Act 2007 for stronger fiscal-monetary policy coordination.
- Uwaleke proposes a transparent framework for coordination, including clear responsibilities for fiscal and monetary authorities.
- The proposed legislation aims to protect CBN's operational autonomy while promoting coherent economic policy architecture.
